Iron Finance

Mar 20, 2021

4 min read

The Foundry: Introduction

What is the Foundry?

Where does the profit of IRON protocol come from?

  • IRON Minting and Redemption Fees
    This a fundamental source of profits for Iron Finance. Minting and redeeming IRON currently costs a 0.3% fee. This fee can be adjusted via community voting but for now we believe it is fair and standard.
  • Excess Collateral Management
    This feature is specific to Iron Finance and does not appear with any uncollateralized stablecoin. The purpose of having a partial-collateralized stablecoin is the ability to maintain the $1 peg of IRON without it having to be backed 100% by collateral. As the project matures, this will become more and more obvious. Therefore, with an increasing demand for IRON, the Target Collateral Ratio (TCR) can be gradually reduced below 100% — which will bring the protocol in an excess- or over-collateralized state (ECR>TCR). This enables STEEL holders to profit from the collateral by simply staking their STEEL in the Iron Finance Foundry.
  • Passive Income Strategies — utilizing idle collateral
    Beside excess collateral, there will be huge amount of collateral sitting idle in the IRON protocol to back for IRON supply and price peg. The collateral is needed when users want to redeem IRON and receive back their collateral. However, only a fraction of this idle collateral is always actively needed for redemption. This leads to another use case: the idle collaterals can be used to gain extra incomes — such as by lending BUSD on Venus, providing liquidity on Belt.Fi, Alpaca or participating in vSafe and bEarn BUSD vaults. This is comparable to traditional fractional-reserve banking in a way but has many advantages over it so let’s highlight the main ones. While in the traditional banking system it would normally take a longer period of time to recall or withdraw particular investments, the beautiful thing in DeFi is collateral can be made available for redemption in a matter of seconds (or blocks ;). Also, while the traditional banks use client’s deposits to profit themselves (and mostly in a very untransparent manner and with unclear risk/reward profile and maturity), IRON will distribute 100% of profits back to STEEL holders.
    The particular details regarding how and under what criteria we can implement these passive income strategies will require a voting decision from STEEL holders.

How are the rewards distributed?

Will the APY be high and what determines it?